Cancelled Mortgage Relief Trials Soar 80% in April: HAMP

The number of cancelled mortgage reduction trials under the government’s foreclosure prevention effort surged 122,467, or 80 percent, in April – compared to a 29.5 percent increase in borrowers approved out of the trial phase and into a reduced-payment program.

The U.S. Treasury’s April report provides the most vivid picture yet of the futility of the $75 billion Home Affordable Modification Program, HAMP.  Many lawmakers and other critics say it is faltering, including the official overseer of the U.S. bailout program that funds much of the effort.

Through April, 277,640 trial mortgage modifications had been cancelled out of 1,214,085 trials started. That’s 122,467 cancellations more than March’s figure of 155,173.

The number of approved “permanent” modifications rose in April to 295,348, up 67,426 from March’s number – or a 29.5 percent increase.

HAMP administrators have responded to borrower complaints about delays or unjustified rejections with tighter rules for mortgage servicers. The top four lenders  – Bank of America, JPMorgan Chase,  CitiMortgage and Wells Fargo – each hold a less than 30 percent rate of converting trails into “permanent” mortgage modifications, the Treasury pointed out in this month’s update.

Treasury officials are now requiring greater transparency from lenders, including details on time-frames in efforts to convert borrowers; the effectiveness of paperwork requests; and rates of approvals or denials.

Effective June 1 are new guidelines requiring servicers to begin collecting upfront documentation from borrowers before initiating trials – a move expected to speed up approvals of reduced mortgage payments, which average more than $500 a month in savings.

“Our focus now is on improving the homeowner experience and holding servicers accountable for their performance. Increased transparency through more robust reporting of servicer-specific data will contribute handily to those efforts,” said Chief of Treasury’s Homeownership Preservation Office Phyllis Caldwell.

U.S. Treasury Secretary Timothy Geithner last month lashed out against mortgage lenders who signed up for incentives under HAMP. In testimony before a Congressional panel, he said Treasury is “conducting targeted, in-depth compliance reviews” of the program’s servicers.

Geithner said he is also troubled by reports that servicers have foreclosed on homeowners potentially eligible for HAMP assistance.

“We are concerned by the wide variation in performance we see across servicers and by the countless frustrated phone calls we receive from borrowers,” Geithner said.

See Related Articles: 

• Geithner: Servicers Failing in Foreclosure Fixes; Under Review
• Watchdog: New Foreclosure Fixes Lack Details, Vision
• Overseer: Foreclosure Fix Failing, Lacks ‘Re-default’ Buffer